Chow Young Hong v Choong Fah Rubber Manufactory
[1961] 3 All ER 1163[1962] A.C. 209
Between: Chow Young Hong
And: Choong Fah Rubber Manufactory
Judges:
Lord Denning
Lord Devlin
Mr L M D De Silva
Subject References:
Privy Council
Malaya
Moneylender
Loan transaction
Bills purchased at discount
Post-dated cheques maturing on same day as bills given as collateral security
Purchaser not a bank or discount house
Whether contract for the repayment of money lent
Money
Loan
Post-dated cheques given as collateral security
Whether moneylending transaction
Legislative References:
Malayan Moneylenders Ordinance, 1951 (No 42 of 1951) - s 15, s 16
Case References:
Olds Discount Co Ltd v John Playfair Ltd - [1938] 3 All ER 275; 159 LT 332, Digest Supp
Sadhu Singh v Sellathurai - (1955), 21 MLJ 117
Judgment date: 4 December 1961
The plaintiff and the defendants who carried on business at Kuala Lumpur as a wholesale dealer in textiles and as a manufacturer of rubber shoes respectively, had out-station customers from whom they received out-station cheques for goods supplied. These cheques took from seven to ten days to clear, depending on the station, and could not be drawn on until they were cleared. The defendants, however, had an arrangement with their bank whereby for a special charge they were allowed to draw on the credit of their out-station cheques at once. On 17 February 1958, the defendants then being in need of ready cash, the plaintiff gave them a number of his out-station cheques totalling $6,964·33 (which the defendants were able to draw on immediately under the arrangement with their bank subject to paying the special charge), the plaintiff receiving in exchange from the defendants their cheque for the same amount post-dated to 24 February 1958. Seven similar transactions took place in February, 1958, and in each case the plaintiff in exchange for his out-station cheques received a cheque from the defendants post-dated by about a week.
In March, 1958, a second group of transactions took place between the parties, this time relating to the defendants' out-station cheques which usually were post-dated. Again the defendants needed immediate cash and in this second group of transactions they arranged that the plaintiff should purchase their out-station cheques at a discount calculated at the rate of 8 cents per $100 per day of the period between the date of the transaction and the maturity of the out-station cheque. Where the plaintiff was doubtful about the credit-worthiness of the defendants' out-station customer he requred the defendants to give as collateral security their own post-dated cheque maturing the same day as the out-station cheque. In the course of the second group of transactions the defendants issued eight such post-dated cheques as collateral security.
The sixteen post-dated cheques drawn by the defendants in favour of the plaintiff in the course of the two groups of transactions, in February and in March, 1958, were all dishonoured on presentation. In an action by the plaintiff suing on the sixteen dishonoured cheques the defendants contended that the contracts pursuant to which the cheques were issued were contracts for the repayment of money lent by the plaintiff so as to fall within the Malayan Moneylenders Ordinance, 1951, and that as the plaintiff was not a licensed moneylenders and there was no written memorandum of the contracts the contracts were, under the ordinance, unenforceable.
Held
None of the transactions amounted to a contract for the repayment of money lent, and there was therefore no defence to the plaintiff's claim, since, with regard to the second group of transactions, their true nature was the purchase of bills at a discount which was a business quite distinct from moneylending and the fact, as here, that the buyer was neither a bank nor a discount house did not alter the nature of the transactions; and with regard to the first group of transactions, there was nothing which could be represented as a lending of money and the promise to repay it, though the plaintiff may have made a profit out of the transactions.
Olds Discount Co Ltd v John Playfair Ltd ([1938] 3 All ER 275) applied.
Appeal allowed.
Notes
On the aspect that discounting bills is not lending, the observations of Tucker and Somervell LJJ in Inland Revenue Comrs v Rowntree & Co Ltd ([1948] 1 All ER at p 486, letter d, and p 487, letters b and c) lend further support to the conclusion reached in the present case.
As to the nature of loans, see 27 Halsbury's Laws (3rd Edn) 13, para 15; and as to what constitutes the business of moneylending under the Moneylenders Acts, 1900 to 1927, see 27 Halsbury's Laws (3rd Edn) 18, 19, paras 26, 27; and for cases on the latter subject and on evidence of lending transactions, see 35 Digest 202, 282-286, and pp 209, 210, 354-359.
Appeal
Appeal by Chow Yoong Hong from a judgment of the Court of Appeal of the Supreme Court of the Federation of Malaya (Hill, Ag CJ, Good and Rigby JJ), dated 1 August 1959, allowing the appeal of the respondents, Choong Fah Rubber Manufactory, from a judgment of the trial judge, Ong J dated 31 March 1959, whereby he gave judgment for the appellant against the respondents for $31,112·06 being the amount of sixteen cheques issued to the appellant by the respondents which were dishonoured on presentation. The respondents submitted that the contracts under which the cheques were given were for the repayment of money lent within the meaning of the Malayan Moneylenders Ordinance, 1951, and that, since the appellant was not a licensed moneylender and there was no memorandum in writing, the contracts, by virtue of s 15 and s 16 of the ordinance, were unenforceable. The facts are set out in the judgment of the Board.